Hess Corporation HES has farmed out a 50% stake in its Bakken midstream assets to Global Infrastructure Partners for a cash consideration of $2.675 billion.
Hess and Global Infrastructure Partners joined forces to form a premier midstream joint venture, named Hess Infrastructure Partners.
The joint venture assumes a debt of $600 million through a five-year Term Loan A facility. The proceeds are divided equally among both the partners. This resulted in total after-tax cash proceeds, net to Hess, of $3.0 billion. Moreover, the joint venture gained independent access to capital which includes a $400 million five-year Senior Revolving Credit Facility that is fully committed. The joint venture intends to continue with a planned initial public offering (IPO) of Hess Midstream Partners LP common units.
The transaction is expected to be immediately value accretive to the shareholders of Hess. The funds raised from this transaction, including cash in hand and an available $4 billion revolving credit facility, gives Hess significant advantage over its peers in terms of liquidity.
In line with its financial strategy, Hess plans to utilize the proceeds from this transaction for various purposes. These include the company’s intention to preserve the strength of its balance sheet in the currently weak oil price environment, offer financial flexibility for future growth opportunities and continue share buybacks on a disciplined basis.
Hess’ midstream assets included in the newly formed joint venture are the natural gas processing plant in Tioga, ND; rail loading terminal in Tioga and associated rail cars; crude oil truck and pipeline terminal in Williams County, ND; propane storage cavern and rail and truck transloading facility in Mentor, MN; and crude oil and natural gas gathering systems in North Dakota.
Global Infrastructure Partners is a leading global infrastructure investor with a widespread midstream energy investment track record.
Hess currently carries a Zacks Rank #3 (Hold). Some better-ranked players from the same space are Transmontaigne Partners L.P. TLP, LRR Energy, L.P. LRE and Pembina Pipeline Corporation PBA. All these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment